Unknown to the customer, chip and Pin payment was via the shop's 'PayPal Here'
chip and Pin machine

I ordered some building materials and paid by Visa card. A few days later I found that the builder had not sought the appropriate approvals for the work and we agreed that it would not be carried out.

I recollected in the small print on the back of the bill that it said refunds were not made or, if they were, at a very low rate. But as only a few days had elapsed since placing the order and the salesman had agreed to keep the goods until needed, I thought it worthwhile to ask for a refund.

I told him we both had a problem in that he would have to keep the stuff until I could find someone to buy it from me or for him to arrange for a refund.

He said I could have a refund but since the sum of £370 was above the amount he could authorise he would have to seek his manager’s approval.

You were told the area manager had agreed the refund and that effecting it would involve only the press of a button. You just needed to go into the shop. You did but then a form had to be filled in. You were told it would be sent together with your receipt to head office. Calls you made began not to be returned.

I suggested you ask Barclaycard, whose card you had paid with, to deal with this for you, possibly under Section 75 of the Consumer Credit Act. Using a credit card for a transaction worth between £100 and £30,000 often means that, where there is breach of contract or misrepresentation, the credit card provider shares responsibility with the merchant.

Barclaycard said it couldn’t consider the claim because the merchant that had debited your account was PayPal. It said: “When payments are made to a company that is not the one providing you with the end goods or services, as is the case with PayPal, there is no claim under Section 75 because the credit card company must have a direct relationship with the supplier for them to be equally liable.”

As PayPal had fulfilled its obligation by passing the funds to the supplier of the goods there was no breach of contract or misrepresentation by PayPal, Barclaycard said.

It added that the “absence of any terms and conditions or refund proof to validate your claim for a refund” meant it couldn’t do a “chargeback”, another option that was mooted. In recognition of some minor inconveniences Barclaycard sent you £30.

I then spoke to PayPal. It went back to the shop, which refunded the £370 after all, leaving you happy. But the details of the way the transaction took place had opened a can of worms.

It transpired that the payment had been taken via a device called PayPal Here. This device, a smartphone app and chip and Pin card reader, was introduced for small businesses in February 2013.

PayPal said a standard card payment like yours going through its machine should have been covered under the Consumer Credit Act by Barclaycard. It said it was no different to putting a card into any other reader and the money went directly to the business. It is not the same as a transaction carried out online, where the amount is paid via a PayPal account.

But Barclaycard insisted that PayPal’s device did not work in the same way as more conventional machines for taking payments. This seemed to leave you, and others unknowingly finding themselves in a similar situation, stripped of their statutory rights for such a transaction.

Meanwhile PayPal went back to Barclaycard about what had now become a much wider issue.

I pressed Barclaycard for a better answer and it referred the matter to its legal team. It took months to get a proper reply. Then it was a matter of Barclaycard backing down. It now agreed that a claim in relation to a transaction made with a PayPal Here device could fall within the scope of Section 75.

It now says: “Following confirmation from PayPal that when a credit card payment is made using a PayPal Here terminal the funds do go directly to the merchant, we can confirm that as long as the merchant is the supplier of the goods, such payments fall within the scope of Section 75.”